Democracy Project Facing New Criticisms

By BEN A. FRANKLIN, Special to the New York Times

Published: December 4, 1985

WASHINGTON, Dec. 3—
The National Endowment for Democracy is a quasi-governmental foundation created by the Reagan Administration in 1983 to channel millions of Federal dollars into anti-Communist ''private diplomacy.''

Its bylaws require ''openness'' and ''public accountability'' in its stewardship of millions of dollars a year in taxpayer funds, which are distributed to labor, business, education and other groups and organizations overseas to promote democratic ideas.

Today, however, for the second time in its brief existence, the endowment finds itself in trouble with Congress. Some of its ''private diplomacy,'' it turns out, has been more than private; it has been secret.

According to endowment officials and Congressional aides, $1.4 million in endowment money has been secretly channeled through an overseas branch of the American Federation of Labor and Congress of Industrial Organizations to two center-right groups in France that have opposed the policies of President Francois Mitterrand's Socialist Party.

What is more, the secrecy was maintained for months under an agreement among officials of the A.F.L.-C.I.O., endowment administrators and the Subcommittee on International Operations of the House Foreign Affairs Committee, which oversees the endowment.

The existence of the agreement was confirmed by Carl Gershman, president of the endowment, and by Richard W. McBride, the subcommittee staff director, after it was uncovered by Mark Shipiro, a reporter at the Center for Investigative Reporting here, who was on assignment for the Paris newspaper Liberation.

A Pivotal Time

The Shipiro scoop, published last week, came at a pivotal time for the endowment. On Wednesday a Senate-House conference committee is scheduled to make a final judgment on the endowment's appropriation for the 1986 fiscal year, compromising between $18 million voted by the House and $10 million by the Senate.

Last year, on the eve of a crucial vote in the House on the endowment's first full-year appropriation, critics of the program produced a cable to the State Department from the United States Embassy in Panama complaining of an ''embarrassing'' and ''compromising'' discovery: $20,000, given by the endowment through another A.F.L.-C.I.O. overseas branch, had been spent in a Presidential election campaign to support the candidate backed by the Panamanian Army. After that disclosure, the House cut the endowment appropriation to zero, but conferees relented and gave $18 million.

Now, according to Representative Hank Brown, the Colorado Republican who is one the endowment's most persistent critics, the disclosure of the endowment's ''French connection,'' as he put it, ''requires Americans to ask how they would feel if they learned that the French Government was giving millions of dollars to the A.F.L.-C.I.O. to oppose the policies of Ronald Reagan.''

Another endowment critic, Representative John Conyers Jr., Democrat of Michigan, said he would demand a Congressional investigation of the endowment's French grants.

Earlier this year, Congressional uncertainty about endowment operations brought an end to an appropriations system that required the endowment to give labor groups up to two thirds of its annual funding. Most of the balance was to be distributed by the Chamber of Commerce of the United States and the foreign institutes of the two major American political parties.

One of the French groups that received endowment funds was the National Inter-University Union, an anti-Communist student federation with reputed ties to the Service d'Action Civique, an outlawed, extreme-right paramilitary group. The other recipient was Force Ouvriere, an anti-Communist trade union.

A week ago, when the story broke that the A.F.L.-C.I.O.'s Free Trade Union Institute had committed $575,000 in endowment funds to the National Inter-University Union and $830,000 to Force Ouvriere, Mr. Gershman, the endowment president, canceled payment of any undistributed money to the U.N.I., as it is known in France, ''until we clear up questions about its anti-democratic character.''

Mr. Gershman said all but $73,000 of the money budgeted for U.N.I. publications had already been disbursed, but he said none of it was ''intended for activities that in any way could be construed as criticism of the Mitterrand government.''

In an interview Mr. Gershman emphasized that the Free Trade Union Institute would be allowed to make no more secret grants. ''In the future there will be a full level of detailed disclosure,'' he said.

Mr. Gershman said details of the grants in France had been ''less than fully disclosed'' after A.F.L.-C.I.O. officials asserted in a memorandum last April that prior promises of secrecy had been made to its sub-grantees and that publicity would pose ''danger or embarrassment'' to them or to the United States.

Details on the two programs in France were omitted from the endowment's 1984 annual report, a document whose introduction declares that ''we must operate openly.'' Details were also omitted from reports of the House subcommittee, Mr. McBride said.

Of the Demand for Secrecy

Eugenia Kemble, executive director of the Free Trade Union Institute in Washington, who wrote the secrecy memorandum, did not return repeated telephone calls.

But according to other labor union and Congressional aides, the demand for secrecy for the labor institute grants in France reflected the tough anti-Communist style of Irving J. Brown, the 74-year-old official who has been the American labor federation's chief overseas representative since the end of World War II.

In the postwar years, Mr. Brown's leadership of American labor union intervention in Europe was credited with helping defeat Communist attempts to sabotage the Marshall Plan and other economic recovery programs of the United States.

But, Mr. McBride said in an interview, ''Today, I think one has to ask the question whether the limited funds available to the N.E.D. should be going to Europe at all, rather than to Central America and the third world countries.''